Bay Area wage growth slowest in more than a decade

By George AvalosOakland Tribune

Posted:
07/22/2013 06:11:48 AM PDT

Updated:
07/22/2013 06:12:04 AM PDT

Click photo to enlarge

Ellis Goldberg, left, wearing a money suit, and Joe Ely, right, stage a protest on the sidewalk in front of the newly opened Walmart grocery on Santa Rita Road in Pleasanton, Calif. on Wednesday, July 17, 2013. About a dozen members of political groups, labor unions and concerned citizens protested the low wages and lack of benefits provided to workers at Walmart, claiming the chain is bad for the community and uses public tax money to subsidize its workers. (Jim Stevens/Bay Area News Group)

Despite a booming tech sector and a broad-based economic recovery, wages in the Bay Area are rising at their slowest pace in more than a decade, leaving many residents struggling to keep up with the cost of living.

Over the 12 months that ended in March, average per-capita wages in three metro areas spread across six Bay Area counties rose just 1 percent, a new survey by the state's Employment Development Department has revealed. That was only one-third the wage growth during the previous 12 months, this newspaper's analysis of the department's data shows, and it marks the lowest annual gain since the survey began in 2001.

Economists attribute some of the slowdown to the creation in recent months of large numbers of low-wage jobs in restaurants, hotels and support services. But they also say sluggish wage growth is consistent with a rebounding economy.

"It's a case of supply and demand," said Jordan Levine, director of economic research with Beacon Economics. "One reason why wage growth is lackluster as you come off the end of a recession is a lot of unemployed people want to get back to work, which makes the supply of labor bigger for employers. It's hard to go in and demand a 10 to 15 percent raise when there is a big queue of people ready to take your job."

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That law of economics provides little comfort to Percy Corona, a machine shop worker who lives in San Jose. "My pay isn't keeping up with the cost of living," he said in an interview. "I used to go out to eat every weekend, but I'm cutting back on that."

In contrast to the average 1 percent wage growth for the Bay Area over the 12-month period ending in March, consumer prices in the nine-county region rose at an annual rate of 2.4 percent during a comparable period.

The anemic wage growth, if it persists, could eventually undermine the overall Bay Area economy, said Scott Anderson, chief economist with San Francisco-based Bank of the West.

"Weaker wages make consumers more vulnerable to adverse price shocks like higher gasoline costs," he said. "And it can slow down the ability of consumers to pay their debts."

Despite recent slow wage growth, the Bay Area remains one of the nation's best-paid regions. At the end of March, the average wage for all occupations in the six counties included in the survey -- Alameda, Contra Costa, Santa Clara, San Mateo, Marin and San Francisco -- was $65,749.

Of the three major metro areas included in the study, the highest average wage was in Santa Clara County, which posted a figure of $70,502, followed by the San Francisco-San Mateo-Marin region with $66,858 and the Alameda-Contra Costa region with an average of $59,886.

Those numbers have been pushed up in recent years by solid wage gains. Wages in the six Bay Area counties rose by 3.1 percent over the 12-month period ending in March 2009; by 2.9 percent over the 12 months ending in March 2010; by 2.3 percent over the 12 months ending in March 2011, and by 2.9 percent over the 12 months ending in March 2012, Employment Development Department figures disclosed.

But the relatively high average incomes in the Bay Area are offset by high costs.

"I rent, and it seems that rents are always going up," said Julie Vlahon, a Dublin resident who works in the public relations field. "Of course, gasoline is always expensive."

Bay Area rents jumped 4.7 percent over the past 12 months, according to a monthly survey by the U.S. Bureau of Labor Statistics, while gas prices have climbed even more quickly, jumping 6.6 percent over the past year, this newspaper's analysis of information compiled by GasBuddy.com shows.

Vlahon recently landed a new job, and found it necessary to ask for a large pay increase to cover her rising cost of living. She was fortunate to have skills that allowed her to demand a pay boost. Many of the new jobs being created in the Bay Area are in low-wage occupations.

"A lot of jobs are being created in occupations such as restaurants, hotels, janitorial and administrative and support services," said Michael Bernick, research fellow at the Milken Institute and former director of the state Economic Development Department. He noted that the average pay for those jobs is often below $20,000 per year: "The mix of new jobs is helping to keep wages from rising."

But while many new jobs pay low wages, the Bay Area continues to enjoy robust job creation and wage growth in job categories such as professional, scientific and technical services. According to this newspaper's analysis of the Employment Development Department figures, the average tech salary in the six-county area is $104,000.

"Technology is where you are seeing very strong job growth, and you are also seeing strong wage growth," Anderson said.

While average wages for all industries rose merely 1 percent in the Bay Area during the 12 months ending in March, wages for technology occupations rose 2.3 percent. In Santa Clara County, overall wages slipped by 0.4 percent, while tech wages climbed 4.2 percent.

Tech wages have risen in part because of the booming demand for the products these workers produce, as companies look at high-tech tools like social media and software to boost their productivity.

"You will continue to see wages rise for technology jobs, as there is currently a shortage of qualified staff to fill the positions available," said Michael Yoshikami, founder of Walnut Creek-based Destination Wealth Management.

While the future for tech workers looks bright, workers in low-wage jobs will continue to struggle.

The rising cost of living could make it more difficult for people with modest paychecks to live in this region, warned Jon Haveman, chief economist with San Rafael-based Marin Consulting. "Workers with middle-level and low skills might, in many cases, get squeezed out," he said.

Some workers feel they are trapped on a wage-price merry-go-round.

"You work all day, and it goes to gas, and housing, and food, and then you start all over again," said Matthew James, a San Jose resident and salesman. "The cost of living goes up, but your income doesn't go up very much."